ILO Brief 1 COVID-19: Public employment services and labour market policy responses Policy Brief August 2020 COVID-19: Public employment services and labour market policy responses Key points Labour market policies and programmes have delivery channels to ensure service continuity during full been critically important in assisting workers and or partial lockdown. In addition to technology based employers to deal with redundancies, furloughs or delivery, flexibility in reorganizing operations and reduced work schedules as a result of COVID-19. partnerships has contributed substantially to boosting the capacity of PES to cope with both the sudden surge The COVID-19 crisis has severely disrupted economies in demand for critical services and the disruptions and labour markets in all world regions, with associated with measures to control the pandemic. estimated losses of working hours equivalent to Critical services maintained in local labour markets have nearly 400 million full-time jobs in the second quarter included the processing of unemployment insurance of 2020, most of which are in emerging and claims, referrals to welfare support, and enhanced developing countries, according to ILO estimates (ILO, matching services to sectors still actively recruiting amid 2020a). Income compensation and active labour the pandemic. market policies (ALMPs) are key elements of the policy-maker’s toolbox in addressing the challenges Active labour market support is likely to be more posed by the crisis. Often delivered through public effective when delivered as an integrated package. employment services (PES), labour market policies and The COVID-19 crisis is likely to have lasting impacts on programmes have been central to cushioning jobs, enterprises and skills, making it more challenging redundancies, preserving jobs and skills, facilitating for employers and workers to navigate the labour employment in essential production and services, and market in the ensuing recession, particularly in keeping people connected to the labour market, economies with large informal labour markets. A including disadvantaged workers in the informal stronger connection between policy measures to ensure economy and new forms of employment. business continuity, active labour market support and Prior adoption of technology and the ability to social protection systems can help governments prevent adjust quickly facilitated the capacity of PES to more people from falling into poverty and respond effectively and maintain services during unemployment. While job creation measures should be the containment period. emphasized, support for enterprises of all sizes should be linked to productivity, job and income preservation PES that had invested in technology for service objectives as well as labour reallocation during recovery. delivery prior to this crisis and those with a clear digital transformation strategy could rely on remote ILO Brief 2 COVID-19: Public employment services and labour market policy responses Key points (continued) Governments must actively support the job recession induced by COVID-19. Targeted labour transitions of displaced workers and groups most at market interventions and broader access to PES are risk of unemployment and discouragement. critical to maintain the employability and job-readiness Maintaining active labour market programmes and PES of groups experiencing greater vulnerability and job funding throughout the recovery period will ensure instability. Inclusive and gender-sensitive approaches that services are scaled up sufficiently to facilitate can accelerate the recovery and encourage labour reintegration in employment. Women, youth, migrant market participation. Actively involving employers and workers and older workers, as groups that are often other relevant partners such as private employment over-represented among the low-skilled and in those agencies in these processes can facilitate access to sectors hardest hit by the effects of the pandemic, are jobs. more likely to find their jobs threatened in the 1. Labour market policies and programmes: A key component of the policy-maker’s toolbox The global health crisis caused by the COVID-19 pandemic Labour market programmes are a key part of the mix of has severely disrupted economies and labour markets in policy responses that governments have put in place to all world regions. Among the most vulnerable are the 1.6 protect jobs, enterprises and incomes from the fallout of billion informal economy workers, representing half of the COVID-19. As in previous crises, policy-makers in global workforce, who are working in sectors experiencing emerging and developed economies have used labour major job losses or have seen their incomes seriously market policies to deal with immediate labour market affected by lockdowns. The COVID‑19 crisis is deterioration in various ways: to speed up return to work, disproportionately affecting 1.25 billion workers in at-risk adapt skills, facilitate workforce reallocation and cushion jobs, particularly in the hardest-hit sectors such as retail temporary income losses after unemployment spells. trade, accommodation and food services, and However, in contrast with past downturns, in this crisis manufacturing (ILO, 2020b). Most of these workers are labour market institutions have had to deal not only with a self-employed, in low-income jobs in the informal sector, fall in aggregate demand, but also with the effects of and have limited access to labour market mechanisms for lockdown restrictions and physical distancing measures cushioning income losses and unemployment. The crisis aimed at slowing the spread of the coronavirus. A has exacerbated existing vulnerabilities and job instability summary of labour market policy responses most for workers already at risk of poverty and economic commonly available, including those directed at labour inactivity. Young people, for example, are experiencing demand and supply and their intermediation, is shown in multiple shocks including disruption to education and box 1. training, employment and income, in addition to greater difficulties in finding jobs. ILO Brief 3 COVID-19: Public employment services and labour market policy responses Box 1. Types of most commonly available labour increase the probability of jobseekers finding market policies employment through job-search assistance, counselling, advice, labour market information and Labour market policies consist of income replacement job-matching. during unemployment spells or reduced working hours (passive support), and labour market integration Source: Authors, based on Brown; Koettl, 2015. For more details, measures available to those unemployed or threatened see Annex I. by unemployment (active support). Passive labour market policies consist mainly of In many developed and emerging economies, PES are unemployment benefits, often combined with other prominent in the execution of labour market policies cash transfers and enterprise support measures. to support job transitions for workers and enterprises. Countries with large numbers of informal workers and Along with other government agencies, PES have played a limited safety nets rely largely on cash transfers and the critical role in the implementation of policy responses by provision of a universal basic income through governments, in particular, to activate, augment and discretionary fiscal mechanisms to compensate those expand support to jobseekers, workers and employers. without access to formal unemployment benefits for income loss. Policy responses designed around existing labour market interventions have been adjusted to reflect the Active labour market policies (ALMPs) can be classified different stages, length and severity of lockdowns and according to their intended functions in influencing physical distancing measures for reducing virus labour demand and supply, and the intermediation of transmission. The use of labour market policies has been the two: observed throughout the different phases of the COVID- Demand-side measures are used to preserve or 19 crisis, from containment and stabilization to exit from support employment during the crisis and recovery, lockdown and employment reactivation (figure 1). and also to provide incentives to create new jobs. ● At the onset of the crisis, priority was given to These measures, which are of limited duration, cover compensating for income loss owing to redundancies wage subsidies, reductions in non-wage labour costs and reduced working hours. In some countries, these and short-time working support. mechanisms were expanded to cover workers in non- Supply-side measures are used to enhance workforce wage employment and informal jobs through social adaptability, including through on-the-job and protection systems and other discretionary fiscal classroom training, typically with effects on medium- packages. to long-term job prospects. These policies also ● During the peak of the crisis, jobs were protected and provide incentives to seek and keep employment, preserved by channelling active support through often targeted at low-skilled and vulnerable workers, measures including recruitment in essential sectors and through in-work benefits in the form of wage labour market attachment measures such as skills payments and subsidies, for example in temporary training, including for new occupations. public employment programmes. Incentives are also ● As the health crisis has begun to ease, a number of applied to promote self-employment and countries